Cancer Society Focuses Its Ads on the Uninsured

“I believe, if we don’t fix the health care system, that lack of access will be a bigger cancer killer than tobacco. The ultimate control of cancer is as much a public policy issue as it is a medical and scientific issue.”
- JOHN R. SEFFRIN, of the American Cancer Society, which plans to devote its
entire advertising budget this year to the consequences of
inadequate health coverage.  See the whole article at NYTimes.com

Average Incomes Fell for Most in 2000-05

There is no doubt that the economic bubble of the late 1990s and 2000 skewed earnings expectations to a degree that will most likely not be repeated in the near future.  As a result, comparing 2005 income levels to those in 2000 does not render the most accurate picture of post-bubble economic adjustments.  However, there is an important dynamic at play that urgently needs to be addressed if the United States plans to continue to broaden economic opportunity as a means to induce growth.    

This dynamic, as highlighted in David Cay Johnston’s “‘05 Incomes, on Average, Still Below 2000 Peak” (NY Times 8/21/07), has to do with a multi-dimensional policy shortcoming that is leading to greater health care and education expenses, decreasing retirement benefits, inefficient tax structures, and a certain level of wage stagnation.  Given the grave consequences of these interactions, policymakers need to tackle the earnings gap in the United States from a holistic point of view, designing policy that increases opportunity overall.  After all, what is the effect of a more balanced tax structure if out-of-pocket health care expenses remain highly unbalanced?    — posted by Arian Hassani

California Budget Project Finds Widening Inequality

The California Budget Project just released a report finding the state’s job growth over the past 27 years has concentrated too much on high and low-wage job development, resulting in widening inequality and an erosion of the middle class.

The study points to a diminishing pool of middle-income job growth, such as factory-workers, bookkeepers, and secretaries.  Instead, California has been adding more lucrative positions such as engineers, executives, lawyers and scientists, leaving less skilled workers to find jobs in the service sector.  Over the 27-year study, wages dropped by 7.2% for the lowest earners, while those in the highest tax brackets have seen a 18.4% increase.

Still, the report is not all doom and gloom.  Over the study period, a college education provided a more positive wage benefit, the wage gap between men and women has shrunk, the percentage of households living at the poverty level has remained essentially flat, and average net worth has increased.  Of course with home prices playing a large role in increasing net worth, one can’t help but wonder what opportunities low-wage renters really have.
 

Can We Save as Well as We Spend?

Americans are spending more and saving less than anytime in our nation’s history.  Sure, we live in a time of fast credit, low-interest mortgages, and consolidated student loans.  But, are we really serving ourselves or our nation by spending like WWII brides saving tin foil?

In HSG’s Personal and Family Savings brief, we recommend several quick fix solutions to support greater personal savings.  While many white collar workers have access to savings vehicles, such as 401Ks and IRAs, lower wage earners do not have the luxury of employer-supported retirement accounts, which has resulted in fewer than 30% of Americans having enough savings to weather 3 months of unemployment!  With no personal savings safety net, where will these people turn? 

Some would say low wage earners don’t have enough to scrape by, let alone save for retirement.  HSG contends that universal, portable, community-based savings programs that are simple and automatic could produce tremendous results for workers at all income levels.  Further, while low wage earners certainly spend a larger percentage of their earnings on essentials, such as housing and food, the Roosevelt Insitution’s “Do Working Families Have ‘Room to Save’?” points out that these workers spend the same proportional amounts on non-essential items as their higher wage earning counterparts.  Maybe it is time to focus on diverting some of that non-essential spending on long-term savings. 

Rethinking the American Corporate Tax System

The Blackstone Group’s recent initial public offering will cost the American government almost $200 million in tax deductions in the long term, bringing to light a large discrepancy between the tax debate in Congress and the tax practices of firms in the highest echelons of the economy.  In structuring the IPO, Blackstone partners paid a 15 percent capital gains rate on the shares they sold to outside investors, while recuperating tax deductions for $3.7 billion worth of good will at a 35 percent rate over the next fifteen years.  It is common for companies to sell shares to the public as a means to decrease the value of goodwill, thus lowering taxes.  However, these tax benefits are usually passed on to shareholders rather than to top executives of the firm.   As alluded to in David Cay Johnston’s “Tax Loopholes Sweeten a Deal for Blackstone” (NY Times, 7/13/07), this “tax low, deduct high” principle is neither beneficial for taxpayers nor shareholders as it represents a considerable wealth transfer from public investors to Blackstone founders.  In an era when the United States needs to promote growth-inducing policies that broaden economic opportunity for the population at large, such tax treatments raise a great deal of concern about the nation’s long-term economic health.   

A Dimishing Return in the Land of Opportunity

We all like to think of the good old American Dream, in which, through perseverance and a can-do attitude, anyone can be lifted from poverty onto a path of achievement that can be passed down to the next generation.  Certainly, I am reminded of my own story, in which my immigrant grandparents created personal wealth by establishing a family business.  It is no surprise then that I have managed to pursue higher education and enjoy an upper middle class life that my grandparents could not have imagined on their long boat ride across the pond.   As I reflect on my personal achievements, I can’t help but notice that the American Dream appears to be a diminishing return.  Much like a fresh-faced start-up firm that initially posts meteoric gains, America has grown into an established company that is considering selling off subsidiaries.  In “THE LAND OF OPPORTUNITY” (NY Times, 7/13/07) the NY Times Editorial Board points to an OECC report finding that “in America, there is more than a 40 percent chance that if a father is in the bottom fifth of the earnings’ distribution, his son will end up there too.”   

In light of such statistics, I can help but wonder, would I be the beneficiary of the American Dream if my grandparents were to arrive on that boat today? 

Reconsidering the Achievement Gap

Jeremy P. Meyer’s article, “COLORADO STUDENT ASSESSMENT PROGRAM RESULTS; CSAP results: Students stay stuck,” (Denver Post, 8/1/07) makes the surprising announcement that ”longitudinal” data has never before been considered in determining academic achievement.  In this era of high-stakes testing, a typical third grader’s performance has only been compared to other third graders who have come before and after them.  Now, for the first time, Colorado students will actually have to compete, with themselves.  

Why isn’t prosperity spreading more equally?

Economists increasingly have been pointing to a growing income disparity in America.  As dot-com multi-millionaires brush up against hamburger-flipping wage earners, one cannot help but point to education as the financial salvo.  Yet, Roger Lowenstein’s article, “The Way We Live Now; The Inequality Conundrum”  (NY Times, 6/10/07), suggests that increasing educational achievement has not been able to to produce the sort of economic equity one would expect.  Instead, he posits that the economic policy developed in reaction to conditions in the 1970s has put us on a course where those in the highest income brackets stand to benefit the most.  In essence, the rich are getting richer and the poor are getting poorer.  This, of course, raises the question: how can we break the cycle of needing to have money in order to make money?